The ObamaCare-CRA-TARP-Clunker lesson

posted at 11:35 am on July 31, 2009 by Ed Morrissey

Somewhere in here, there’s a lesson to be learned about government distortion of private markets. When government artificially inflate the value of a commodity in attempting social engineering, it usually either spends more money than they initially realize, leave the private sector holding the bag, and make themselves look foolish … at best:

The government suspended the explosively popular cash-for-clunkers program, fearing it would go broke before it could pay what it still owes dealers for a huge backlog of sales, according to congressional offices and a dealer group.

Suspension of the program was confirmed by Bailey Wood, legislative director for the National Automobile Dealers Association (NADA), which had been called Thursday night by the National Highway Traffic Safety Administration, which administers the program. Rep. Candice Miller, R-Mich., confirmed as well, saying she had been told by congressional leaders.

Why was it “explosively popular”? It made worthless cars valuable again. The vehicles got $4500 for a brief window rather than their previous real value, in many cases a fraction of the government payout. That inflated value prompted people to rush to their local dealers to use their government subsidy to buy new vehicles.

Unfortunately, Congress miscalculated how many people would be willing to squash their old car for that kind of boost in trade-in value. No harm, no foul, right? Not exactly:

Carmakers and dealers have booked expensive advertising to capitalize on buyers’ interest in CARS, and now will be left promoting a tie-in with a discontinued government program — one that wasn’t supposed to end until Nov. 1. “Disappointed,” says Chrysler spokesman Scott Brown..

“It’s too late to recall the ads,” says Beau Boeckmann of Galpin Ford, the nation’s largest Ford dealer, in Los Angeles. Galpin had done about 100 clunker deals and was hoping for more. ” We had increased our ad budget to get the word out. We are very heavy on radio, newspaper and getting direct mail together,” Boeckmann says.

“Now what do you tell people when they walk in” for a clunker deal? “It’s tough.”

And how did the government run what should have been a relatively simple program? In its typical fashion:

Rules governing the program totaled 135 pages. They required dealers to register, then to fill out electronic forms after each transaction. Dealers had to guarantee they gave the customer the appropriate discount, that they wrecked the engine in the clunker so it never could be reused, than the non-running junker went to a scrap dealer.

“They keep coming up with new forms to sign,” says Churchill.

In the Queens borough of New York, Paragon Honda already hauled away nearly 60 clunkers to a junkyard before it found the rules require them to be disabled on the auto lot. Now they have to be brought back, have their engines destroyed and hauled back.

The government imposed all these costs and heightened expectations on car dealers without having a plan . And this was just to kill a few hundred thousand gas-guzzlers. Imagine what it will be like when the government takes charge of keeping hundreds of millions of people healthy.

Of course, no one has really explained why taxpayers should subsidize the destruction of gas-guzzlers (we do remember that we’re paying those ridiculous subsidies, don’t we?) that many of us couldn’t afford when they were sold as new, or that we had better sense than to buy. No one explained why taxpayers should subsidize sub-prime loans for people who didn’t qualify to buy the houses they wanted ten years ago, either. It’s yet another example of how government rarely learns from its own mistakes. This one, fortunately, will be much less costly, but therefore also much less likely to teach people anything.

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OT but cool. Glen Beck is playing a song that some anonymous guy sent to him. Usually these things are crap. This song is brilliant and truly artistic. It’s about America having lost its way. The guy’s on the air now, talking to Beck, the man is amazing. Intelligent. As an artist he’s edgy as hell. Outstanding. Beck is having the song produced. It’s really cool. Keep an eye out for it.

I saw about 4 commercials this AM for the clunker program. They were amusing. :)

becki51758 on July 31, 2009 at 11:42 AM

I think it is hillarious that the choices for the news today are a photo-op to undo the filthy liar’s tendency to shoot off his mouth, announcement that a government program ran out of money in four days, or the ongoing discussion about how Obamacare has gone down in flames until at least October (Schumer was talking by Christmas).

I remember reading, but not in the ObamaCare bill itself, that is would cost an employer $1200 (a fine) to have an employee covered by the public plan. What happend with C4C will happen if ObamaCare gets passed. Employers will dump employees to the public plan at the same pace as people traded in the worthless cars in the C4C program.

CARS does not increase the demand for new automobiles, it merely shifts them forward. People who take advantage of the program were probably thinking about buying a new car or truck anyway.

This program really doesn’t stimulate as much as transfer resources from one group to another. Money spent on the new car is money not spent on something else. If the new car is bought with borrowed money someone else doesn’t get credit and it reduces future consumer income. Credit is nothing more then a future claim on your income.

I have not read the terms of this program but was always suspicious about it. You know, kinda like those silly-assed gun turn-in programs where some guy turns in a rusty old revolver for a $100 Walmart chit that he can use to by ammo for his Glock or a thief turns in a hot Saturday Night Special.

(Don’t get me wrong. These gun turn-ins are a tremendous waste — especially when some aging widow turns her late husband’s souvenir luger and the thing gets dumped in the bay. Lunacy.)

Pulled my 82 Toyota P/U out of storage when fuel prices reached $4.90. Tuned it up, and it gets 30mpg with over 500k in the original motor. My 4×4 Ford F-150 is parked and non-opt, because it gets around 8mpg. I haven’t had a car payment since 1989. You can keep your friggin taxpayer funded clunker program, your government health care grab, your crap n tax energy plan and get the government out of my life.

Another side affect of this program comes from the requirement that “junkers” be crushed, not scrapped.

In the past, junked cars went to scrap yards and had their usefull parts recycled (gee, I thought liberals liked recycling). This enabled many people who couldn’t afford new parts, much less new cars, to keep their old cars running a little longer.

With all of the junkers being crushed, this supply of used parts will dry up.

Rules governing the program totaled 135 pages… [One dealer had] already hauled away nearly 60 clunkers to a junkyard before it found the rules require them to be disabled on the auto lot. Now they have to be brought back, have their engines destroyed and hauled back.

Better learn to live with it. This is how EVERY business works in a Communist country.

Jeff, Jeff, Jeff…..have we not learned something from the entire Gates affair. This was clearly a teachable moment but I guess you were not paying attention. We need to move away from racially motivated streotypes and language that conveys power relationships based on identity.

If it takes 135 pages of instructions to administer what is essentially a voucher system, how many pages would it take to deal with grievance procedures under Obamacare. Or do we give up our right to dispute what the death czar dictates?

I’d like to know the ratio of people who bought gas guzzling brand spanking new or preowned SUVs when they turned in their “gas guzzlers”.

Avatar72 on July 31, 2009 at 12:28 PM

The program didn’t allow people to purchase preowned vehicles; they had to be new.

Yesterday a congressman was on t.v. complaining that many of the new car purchases under the program were Lexuses; he wanted to know why taxpayers were giving money away to people who can afford to buy new Lexuses. But why should we worry about that, right sesquipedalian? It doesn’t matter if the program makes sense, just that it’s “wildly successful” and “explosively popular”– right?

Scams a-plenty with this one. Guys buying old cars for a couple hundred dollars and getting cash for clunkers on a new car. Then, they are taking the new car and selling it and making a cool couple of thousand dollars. Stupid government and we are paying for this stupidity. Nice going Debbie Stabenow – Michigan should be so proud. No wonder their economy is in the toilet.

I’d like to know the ratio of people who bought gas guzzling brand spanking new or preowned SUVs when they turned in their “gas guzzlers”.

Avatar72 on July 31, 2009 at 12:28 PM

Can’t do that. You had to buy a vehicle that met a certain mandated EPA MPG floor in order to qualify. Apparently some people got screwed in that part of the deal also as the government changed the rules in the middle of the game (gasp, they’d never do that with health care, would they?/sarc). Rush related a story yesterday of someone who had purchased a car last week that met the requirements but was completing the paperwork, the EPA changed the mileage designation over the weekend, and now the new car he bought doesn’t qualify. Dealership is demanding that he return the car or pay the dealer the extra $4500.

…Honest people will try to stay within the rules…….meanwhile dishonest people don’t care if there are 3,000 pages of rules, they’ll ignore them.

Skandia Recluse on July 31, 2009 at 12:04 PM

At this point, honesty no longer has anything to do with it. It’s not HARD to follow 135 pages of hastily-drafted regulation; it is IMPOSSIBLE.

For all practical purposes, a GM dealership in America today cannot be operated in a way that is fully legal. So it’s no longer a question of which dealers are “honest” or “dishonest”; it’s only a question of which ones will toe the political line and pay the right bribes to the right aparachick, who will ALWAYS be able to find a reason to arrest and/or expropriate them if they don’t.

I’m personally sick and tired of these kinds of programs that use our tax dollars to help a select group of people. If you’re going to hand $4500 to someone to buy a car how is that fair to the person who bought a car last month and got nothing? Same with these mortgage bailouts, which I won’t go into because we’ve already blogged the daylights out of that subject. And taxes…you can increase the tax on cigarettes so only smokers pay more yet people who are obese but continue to graze at Dunkin Donuts and McD’s don’t pay a penny more? That’s illogical.

Scams a-plenty with this one. Guys buying old cars for a couple hundred dollars and getting cash for clunkers on a new car. Then, they are taking the new car and selling it and making a cool couple of thousand dollars.

Wait until next year when the energy tax credit reduces the amount of tax money the government gets. I just ordered six new windows that may not reduce my energy cost that much. I am replacing wood double paned windows with vinyl windows. Since these tilt in, I can wash my own windows and also I will not have to pay someone to paint them.
I looked in the clunker program, but my old car gets too good of gas mileage.

Abortions will always be available (at taxpayer expense) to prevent the return to “black market” abortions.

Wasn’t the whole liberal justification for Roe Vs. Wade to prevent “home style” “black market” abortions? Can you imagine black market heart surgery? Brain surgery? Gall Bladder removal, knee replacement etc., when the govt deems such procedures as not cost effective due to age, disability (physical or emotional), or condition (no liver transplants for alcoholics), and they are performed under who knows what kind of conditions and limited facilities (garages, homes, etc.).

It sounds like Congress is scrambling to “fix’ this problem they created. Meanwhile, Obama says it is working as planned! We WILL destroy the evil automobile industry (by making the dealers give customers 4500 dolars then stiffing the dealers) followed by a whole generation of buyers who will be afraid to buy new cars for years.

The comparison to sub-prime loans doesn’t make sense to me. Unlike what happened with the housing fiasco, the government is not suing banks and/or car dealers demanding that they give car loans to people who can’t afford to own a car.

And unlike foreclosed homes which are repo’d by the banks, at least these clunkers are paid for before they’re brought in to be sent to the clunkyard, and exchanged for a shiny (government subsidized) new one.

How do you do quotes, strike-outs, etc. with a mobile device on this website?
Colorado Anne on July 31, 2009 at 12:46 PM
I can see that you have become acquainted with our lack of features, so you are now, truly, a HA poster. Welcome to the family.
DFCtomm on July 31, 2009 at 2:55 PM
Oh, so it’s not just me. WHEW! Didn’t wanna sound stoop-ed. : – 0

Car companies sunk money in ad campaigns to maximize their piece of the $1 billion plan, and somehow we’re supposed to feel bad for them because they could have gotten their piece of the pie for free, if they hadn’t misread the market as badly as the Obama administration and congress?

CARS does not increase the demand for new automobiles, it merely shifts them forward. People who take advantage of the program were probably thinking about buying a new car or truck anyway.

This program really doesn’t stimulate as much as transfer resources from one group to another. Money spent on the new car is money not spent on something else. If the new car is bought with borrowed money someone else doesn’t get credit and it reduces future consumer income. Credit is nothing more then a future claim on your income.

jerryofva on July 31, 2009 at 11:55 AM

I haven’t figured out yet how they’re going to pin it on Bush when they realize that the next year’s worth of demand just got used up in four days. Pretty good chance that the industry collapses harder than it did last summer. The blame game would probably have to be Halliburton-related in some way.

Car companies sunk money in ad campaigns to maximize their piece of the $1 billion plan, and somehow we’re supposed to feel bad for them because they could have gotten their piece of the pie for free, if they hadn’t misread the market as badly as the Obama administration and congress?

taznar on July 31, 2009 at 3:55 PM

Most of the ads came from local cardealers to get people to show up at their car lots.